Unlike cash-on-cash return, cap rate allows a more even-handed comparison of the property performance irrespective of leverage and financing cost.
Calculating cap rates manually can be tedious, so we automated it for you. With PortfolioBay, you can just focus on your strategies.
Automated cap rate tracking as you manage income and expense
Informed decision-making for smart investors and better landlords
As you manage incomes and expenses, and update property values, the cap rates are updated automatically, providing you real-time feedback on your portfolio performance.
Knowing how properties perform within your portfolio helps you to refine acquisition strategies and management style, making you an informed investor and a better landlord.
For the purpose of comparing property financial performance, we need to separate the property finance from the acquisition finance. Property finance is only concerned about the cost of upkeep and rental income, and the acquisition finance is concerned about the mortgage payment.
Cash-on-cash return can vary significantly depending on the acquisition finance, so, comparing it between two properties with different financing situation can lead to the wrong conclusion.
Instead, we should use cap rate, which solely focus on the property finance, to compare property performance irrespective the financing situations.
There are many options for you, both as investor and landlord. For example, as an investor, knowing the cap rates of your current properties helps you to intuitively understand how good of a deal it is when buying another property. Or, you can compare properties across the portfolio to know which property is good for holding and which could be exchanged.
As landlord, you can also use this information to better manage expenses or set a target rent prices. The exact strategies you can derive from the cap rate information are numerous, and we automated the calculation, so you can focus on your strategies more.
We use financial data from the past 3 years to estimate the cap rate for each property. If the property was held for less than 3 years, we will use all available data for the cap rate analysis.
Good is subjective. Quantitatively speaking, 50% of the properties managed through PortfolioBay has a cap rate between 6.2% to 9.5%.
PortfolioBay tracks the property cap rate based on the historical expense and lease data that you've entered. So, it's as good as you manage to update all your expenses and leases.